Program Effectiveness: During recent years, the Department has applied a
jeed test to loan applicants from families with adjusted gross Incomes of
$30,000 and above. Table 2 shows that the need test tends to have the
effect of lessening the number of applicants eligible for a loan and
decreasing the average amount of loan awarded to those who are eligible.
Students In the $30,000-$39,999 category actually Increased their rate of
participation from 24.8 percent In FY 1980 to 25.3 percent In FY 1983.
However, the participation rate for borrowers In the $40,000+ Income group
had reached a peak of 25.6 percent In FY 1981 but fell to 13.0 percent In
FY 1983. A comparison of these two Income groups shows that the FY 1982
need test did not generally limit borrowing by those In the $30,QOQ-$39,999
category. However, only about one half of students from families In the
$40,000+ Income bracket were eligible to borrow after Imposition of the
Those still able to borrow could not generally borrow as much as before.
For example, those 1n the $30,000-$39,999 Income group had borrowed an
average of $2,048 In FY 1981 but on average took a loan of only $1,817 In
1983, a decrease of 12.7 percent over the two-year period. Those In the
$40,000+ category had an average loan of $2,161 In FY 1981 but only $1,846
1n FY 1983, a decrease of 17.1 percent. The effect of the need test,
therefore, was to lower participation rates and average loan amounts for
those borrowers who were subject to It.
There 1s currently no need test for borrowers with family Incomes of less
than $30,000. Data in Table 2 show that participation rates for this group
Increased rapidly from FY 1980 to FY 1983. For example, of those in the lowest
income category (less than $10,000) 13.9 percent borrowed in FY 1980 and 25.4
percent borrowed in FY 1983. Corresponding rates for the $10,000 thru $19,999
category were 20.6 percent and 27.8 percent, respectively; and for the $20,000
thru $29,999 category, 24.8 percent and 29.3 percent.
Guaranteed student loans also covered a smaller percentage of the total cost
of education in FY 1983 than in earlier years. For the lowest income students
(below $10,000), the average loan amount was about the same percentage of total
cost In FY 1983 as in FY 1980. To maintain this loan/cost ratio, however,
these students increased their borrowing by about 29 percent over the three-
year period. For all other income groups, the percentage of costs covered
by guaranteed loans decreased between 3 and 14 percentage points. For all
borrowers, guaranteed loans comprised 40.1 percent of total cost in FY 1980
but only 31.7 percent in FY 1983.
D. Plans for Program Improvement and Recommendations for Legislation
The Department continued to increase its efforts to collect on outstanding
defaults and to reduce the incidence of default in FY 1984. The Department
plans to continue 1n FY 1985:
o Obtaining statutory amendments relating to debt collection.
o Expanding collection activities through referral of additional defaulted
accounts to private collection agencies.
o Sharing Information on defaulted accounts with consumer credit bureaus.
o Conducting computer matches to locate defaulters.. 21,246